TX-Texas

FINANCE CODE

CHAPTER 393. CREDIT SERVICES ORGANIZATIONS

SUBCHAPTER A. GENERAL PROVISIONS

§ 393.001. DEFINITIONS. In this chapter:

(1) "Consumer" means an individual who is solicited to purchase or who purchases the services of a credit services

organization.

(2) "Consumer reporting agency" has the meaning assigned by Section 603(f), Fair Credit Reporting Act (15 U.S.C. Section 1681a(f)).

(3) "Credit services organization" means a person who provides, or represents that the person can or will provide, for the payment of valuable consideration any of the following services with respect to the extension of consumer credit by others:

(A) improving a consumer's credit history or rating;

(B) obtaining an extension of consumer credit for a consumer; or

(C) providing advice or assistance to a consumer with regard to Paragraph (A) or (B).

(4) "Extension of consumer credit" means the right to defer payment of debt offered or granted primarily for personal, family, or household purposes or to incur the debt and defer its payment.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.002. PERSONS NOT COVERED. (a) This chapter does

not apply to:

(1) a person:

(A) authorized to make a loan or grant an

extension of consumer credit under the laws of this state or the

United States; and

(B) subject to regulation and supervision by this

state or the United States;

(2) a lender approved by the United States secretary

of housing and urban development for participation in a mortgage

insurance program under the National Housing Act (12 U.S.C. Section

1701 et seq.);

(3) a bank or savings association the deposits or

accounts of which are eligible to be insured by the Federal Deposit

Insurance Corporation or a subsidiary of the bank or association;

(4) a credit union doing business in this state;

(5) a nonprofit organization exempt from taxation

under Section 501(c)(3), Internal Revenue Code of 1986 (26 U.S.C.

Section 501(c)(3));

(6) a real estate broker or salesperson licensed under

Chapter 1101, Occupations Code, who is acting within the course and

scope of that license;

(7) an individual licensed to practice law in this

state who is acting within the course and scope of the individual's

practice as an attorney;

(8) a broker-dealer registered with the Securities and

Exchange Commission or the Commodity Futures Trading Commission

acting within the course and scope of that regulation;

(9) a consumer reporting agency;

(10) a person whose primary business is making loans

secured by liens on real property;

(11) a mortgage broker or loan officer licensed under

Chapter 156, Finance Code, who is acting within the course and scope

of that license; or

(12) an electronic return originator who:

(A) is an authorized Internal Revenue Service

e-file provider; and

(B) makes, negotiates, arranges for, or

transacts a loan that is based on a person's federal income tax

refund on behalf of a bank, savings bank, savings and loan

association, or credit union.

(b) In an action under this chapter, a person claiming an

exemption under this section has the burden of proving the

exemption.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended

by Acts 1999, 76th Leg., ch. 344, § 2.036, eff. Sept. 1, 1999;

Acts 1999, 76th Leg., ch. 1254, § 3, eff. Sept. 1, 1999; Acts

2003, 78th Leg., ch. 135, § 2, eff. Sept. 1, 2003; Acts 2003,

78th Leg., ch. 1276, § 14A.775, eff. Sept. 1, 2003.

§ 393.003. WAIVER VOID. A waiver of a provision of this

chapter by a consumer is void.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

SUBCHAPTER B. REGISTRATION AND DISCLOSURE STATEMENTS

§ 393.101. REGISTRATION STATEMENT. (a) Before

conducting business in this state, a credit services organization

shall register with the secretary of state by filing a statement

that:

(1) contains the name and address of:

(A) the organization; and

(B) each person who directly or indirectly owns

or controls at least 10 percent of the outstanding shares of stock

in the organization; and

(2) fully discloses any litigation or unresolved

complaint relating to the operation of the organization filed with

a governmental authority of this state or contains a notarized

statement that there has been no litigation or unresolved complaint

of that type.

(b) The organization shall keep a copy of the registration

statement in its files.

(c) The secretary of state may not require an organization

to provide information other than information contained in the

registration statement.

(d) A registration certificate expires on the first

anniversary of its date of issuance. A registered credit services

organization may renew a registration certificate by filing a

renewal application, in the form prescribed by the secretary of

state, and paying the renewal fee.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended

by Acts 1999, 76th Leg., ch. 62, § 7.44(a), eff. Sept. 1, 1999.

§ 393.102. UPDATE OF REGISTRATION STATEMENT. A credit

services organization shall update information contained in the

registration statement not later than the 90th day after the date on

which the information changes.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.103. INSPECTION OF REGISTRATION STATEMENT. A

credit services organization shall allow a consumer to inspect the

registration statement on request.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.104. FILING FEE. The secretary of state may

charge a credit services organization a reasonable fee to cover the

cost of filing a registration statement or renewal application in

an amount not to exceed $100.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended

by Acts 1999, 76th Leg., ch. 62, § 7.44(a), eff. Sept. 1, 1999.

§ 393.105. DISCLOSURE STATEMENT. Before executing a

contract with a consumer or receiving valuable consideration from a

consumer, a credit services organization shall provide the consumer

with a document containing:

(1) a complete and detailed description of the

services to be performed by the organization for the consumer and

the total cost of those services;

(2) an explanation of the consumer's right to proceed

against the surety bond or account obtained under Section 393.302;

(3) the name and address of the surety company that

issued the surety bond or the name and address of the depository and

the trustee and the account number of the surety account, as

appropriate;

(4) a complete and accurate statement of the

consumer's right to review information on the consumer maintained

in a file by a consumer reporting agency, as provided by the Fair

Credit Reporting Act (15 U.S.C. Section 1681 et seq.);

(5) a statement that information in the consumer's

file is available for review:

(A) without charge on request made to the

consumer reporting agency not later than the 30th day after the date

on which the agency receives notice the consumer has been denied

credit; and

(B) for a minimal charge at any other time;

(6) a complete and accurate statement of the

consumer's right to dispute directly with a consumer reporting

agency the completeness or accuracy of an item contained in the

consumer's file maintained by the agency;

(7) a statement that accurate information cannot be

permanently removed from the files of a consumer reporting agency;

(8) a complete and accurate statement explaining:

(A) when consumer information becomes obsolete;

and

(B) that a consumer reporting agency is prevented

from issuing a report containing obsolete information; and

(9) a complete and accurate statement of the

availability of nonprofit credit counseling services.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.106. COPY OF DISCLOSURE STATEMENT. A credit

services organization shall keep in its files a copy of a document

required under Section 393.105, signed by the consumer,

acknowledging receipt, until the second anniversary of the date on

which the organization provides the document.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

SUBCHAPTER C. CONTRACT FOR SERVICES

§ 393.201. FORM AND TERMS OF CONTRACT. (a) Each

contract for the purchase of the services of a credit services

organization by a consumer must be in writing, dated, and signed by

the consumer.

(b) In addition to the notice required by Section 393.202,

the contract must:

(1) contain the payment terms, including the total

payments to be made by the consumer, whether to the organization or

to another person;

(2) fully describe the services the organization is to

perform for the consumer, including each guarantee and each promise

of a full or partial refund and the estimated period for performing

the services, not to exceed 180 days;

(3) contain the address of the organization's

principal place of business; and

(4) contain the name and address of the organization's

agent in this state authorized to receive service of process.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.202. NOTICE OF CANCELLATION. (a) The contract

must conspicuously state the following, in type that is boldfaced,

capitalized, underlined, or otherwise distinguished from the

surrounding written material and in immediate proximity to the

space reserved for the consumer's signature: "You, the buyer, may

cancel this contract at any time before midnight of the third day

after the date of the transaction. See the attached notice of

cancellation form for an explanation of this right."

(b) The contract must have attached two easily detachable

copies of a cancellation notice. The notice must be in boldfaced

type and in the following form:

"Notice of Cancellation

You may cancel this contract, without any penalty or

obligation, within three days after the date the contract is

signed.

If you cancel, any payment made by you under this contract

will be returned within 10 days after the date of receipt by the

seller of your cancellation notice.

To cancel this contract, mail or deliver a signed dated copy

of this cancellation notice, or other written notice, to:

(name of seller) at (address of seller)(place of business) not

later than midnight (date)

I hereby cancel this transaction.

(date)

(purchaser's signature)"

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.203. ISSUANCE OF CONTRACT AND OTHER DOCUMENTS. A

credit services organization shall give to the consumer, when the

document is signed, a copy of the completed contract and any other

document the organization requires the consumer to sign.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.204. BREACH OF CONTRACT. The breach by a credit

services organization of a contract under this chapter, or of an

obligation arising from a contract under this chapter, is a

violation of this chapter.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

SUBCHAPTER D. PROHIBITIONS AND RESTRICTIONS

§ 393.301. REPRESENTATIVE. In this subchapter, a

representative of a credit services organization includes:

(1) a salesperson, agent, or other representative of

the organization; and

(2) an independent contractor who sells or attempts to

sell the services of the organization.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.302. CHARGE OR RECEIPT OF CONSIDERATION BEFORE

COMPLETION OF SERVICES. A credit services organization or a

representative of the organization may charge or receive from a

consumer valuable consideration before completely performing all

the services the organization has agreed to perform for the

consumer only if the organization has obtained a surety bond for

each of its locations or established and maintained a surety

account for each of its locations in accordance with Subchapter E.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended

by Acts 1999, 76th Leg., ch. 62, § 7.43(a), eff. Sept. 1, 1999.

§ 393.303. CHARGE OR RECEIPT OF CONSIDERATION FOR

REFERRAL. A credit services organization or a representative of

the organization may not charge or receive from a consumer valuable

consideration solely for referring the consumer to a retail seller

who will or may extend to the consumer credit that is substantially

the same as that available to the public.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.304. FALSE OR MISLEADING REPRESENTATION OR

STATEMENT. A credit services organization or a representative of

the organization may not:

(1) make or use a false or misleading representation

in the offer or sale of the services of the organization, including:

(A) guaranteeing to "erase bad credit" or words

to that effect unless the representation clearly discloses this can

be done only if the credit history is inaccurate or obsolete; and

(B) guaranteeing an extension of consumer credit

regardless of the person's credit history unless the representation

clearly discloses the eligibility requirements for obtaining the

extension; or

(2) make, or advise a consumer to make, a statement

relating to a consumer's credit worthiness, credit standing, or

credit capacity that the person knows, or should know by the

exercise of reasonable care, to be false or misleading to a:

(A) consumer reporting agency; or

(B) person who has extended consumer credit to a

consumer or to whom a consumer is applying for an extension of

consumer credit.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.305. FRAUDULENT OR DECEPTIVE CONDUCT. A credit

services organization or a representative of the organization may

not directly or indirectly engage in a fraudulent or deceptive act,

practice, or course of business relating to the offer or sale of the

services of the organization.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.306. ADVERTISING SERVICES WITHOUT FILING

REGISTRATION STATEMENT. A credit services organization or a

representative of the organization may not advertise the services

of the organization if the organization has not filed a

registration statement required by Subchapter B.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.307. CAUSING WAIVER PROHIBITED. A credit services

organization may not attempt to cause a consumer to waive a right

under this chapter.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

SUBCHAPTER E. SURETY BOND; SURETY ACCOUNT

§ 393.401. SURETY BOND. (a) The surety bond of a

credit services organization must be issued by a surety company

authorized to do business in this state.

(b) A copy of the bond shall be filed with the secretary of

state.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.402. SURETY ACCOUNT. (a) The surety account of a

credit services organization must be held in trust at a federally

insured bank or savings association located in this state.

(b) The name of the depository and the trustee and the

account number of the surety account must be filed with the

secretary of state.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended

by Acts 1999, 76th Leg., ch. 344, § 2.037, eff. Sept. 1, 1999.

§ 393.403. AMOUNT OF SURETY BOND OR ACCOUNT. The surety

bond or account of a credit services organization must be in the

amount of $10,000.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.404. BENEFICIARY OF SURETY BOND OR ACCOUNT. The

surety bond or account of a credit services organization must be in

favor of:

(1) this state for the benefit of a person damaged by a

violation of this chapter; and

(2) a person damaged by a violation of this chapter.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.405. CLAIM AGAINST SURETY BOND OR ACCOUNT. (a) A

person making a claim against a surety bond or account of a credit

services organization for a violation of this chapter may file suit

against:

(1) the organization; and

(2) the surety or trustee.

(b) A surety or trustee is liable only for actual damages,

reasonable attorney's fees, and court costs awarded under Section

393.503(a).

(c) The aggregate liability of a surety or trustee for an

organization's violation of this chapter may not exceed the amount

of the surety bond or account.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.406. TERM OF SURETY BOND OR ACCOUNT. The surety

bond or account of a credit services organization must be

maintained until the second anniversary of the date on which the

organization ceases operations.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.407. PAYMENT OF MONEY IN SURETY ACCOUNT TO CREDIT

SERVICES ORGANIZATION. (a) A depository may not pay money in a

surety account to the credit services organization that established

the account or a representative of the organization unless the

organization or representative presents a statement issued by the

secretary of state indicating that the requirement of Section

393.406 has been satisfied in relation to the account.

(b) The secretary of state may conduct an investigation and

require information to be submitted as necessary to enforce this

section.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

SUBCHAPTER F. CRIMINAL PENALTIES AND CIVIL REMEDIES

§ 393.501. CRIMINAL PENALTY. (a) A person commits an

offense if the person violates this chapter.

(b) An offense under this chapter is a Class B misdemeanor.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.502. INJUNCTIVE RELIEF. A district court on the

application of the attorney general or a consumer may enjoin a

violation of this chapter.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.503. DAMAGES. (a) A consumer injured by a

violation of this chapter is entitled to recover:

(1) actual damages in an amount not less than the

amount the consumer paid the credit services organization;

(2) reasonable attorney's fees; and

(3) court costs.

(b) A consumer who prevails in an action under this section

may also be awarded punitive damages.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.504. DECEPTIVE TRADE PRACTICE. A violation of

this chapter is a deceptive trade practice actionable under

Subchapter E, Chapter 17, Business & Commerce Code.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.

§ 393.505. STATUTE OF LIMITATIONS. An action under

Section 393.503 or 393.504 must be brought not later than the fourth

anniversary of the date on which the contract to which the action

relates is executed.

Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.